Prepared to place its faith in new leadership, Christian Super has signed an exclusive Memorandum of Understanding (MoU) with superannuation fund Australian Ethical (ASX: AEF) as a potential merger is explored.
The parties have entered a non-binding period of due diligence and transition planning, which if successful would lead to Christian Super’s 30,000 members and $2 billion under management being absorbed by Australian Ethical Super through a successor fund transfer (SFT) in late 2022 or early 2023.
With due diligence due for completion by the end of May, barring any unforeseen circumstances or divine intervention, Australian Ethical will subsequently manage more than $9 billion on behalf of 100,000 Australians across its range of superannuation, managed fund and ETF (exchange-traded funds) products.
“We’re delighted to be exploring this opportunity with Christian Super. It is a meaningful endorsement of our purpose and investment philosophy, which remain unchanged and only strengthened by this opportunity,” Australian Ethical chair Steve Gibbs said.
“Recent research shows that more Australians than ever expect their money to be invested responsibly and ethically. This comes as no surprise to us at Australian Ethical, as we’ve seen extraordinary growth as Australians seek to invest in line with their values.
“This opportunity not only accelerates the trajectory we are on through clear stakeholder benefits but also significantly enhances our influence as the leading ethical investment voice in Australia.”
Sydney-based Christian Super had been exploring merger opportunities since the Australian Prudential Regulation Authority (APRA), the regulator of super funds in Australia, imposed additional license conditions in December 2021 following an investigation into Christian Super’s investment oversight, governance and strategic decision-making.
The conditions were also aimed at rectifying Christian Super’s persistent investment underperformance, culminating in the fund’s MySuper product failing the first annual performance test in August 2021.
“We believe this decision is in the best financial interests of our members, but it also presents a great opportunity to maintain and amplify our focus on investing our member's money in line with their Christian values and beliefs,” Christian Super CEO Ross Piper said.
“While the decision is still subject to ongoing due diligence, the focus of the coming months will be to develop and agree on a new combined operating model, which will leverage key strengths of each organisation.”
“The proposals were evaluated based on important selection criteria, and Christian Super’s board agreed that the proposal from Australian Ethical was the best placed to deliver strong outcomes for our members into the future,” he added.
The fund of choice for more than 3,500 ministry organisations across Australia, Christian Super members do not have any say in its direction as strategic decisions, such as mergers, are made by Christian Super’s trustee board which ensures that the fund acts in members’ best financial interests.
Christian Super ethically screens all investments to see if they align with its biblical values. The fund avoids investing in any companies that violate human rights, use exploitation or predatory practices, or any industries that produce addictive or harmful goods and services.
Acknowledging that Australian Ethical is not an overtly Christian organisation, Christian Super believes there are deep synergies and areas of alignment between the two super funds. In areas where there may be variance in ethics or biblical views, the parties are committed to ensuring a suitable governance mechanism to consider all perspectives appropriately.
Christian Super board members include the chair of Wesley Mission, Michael Anderson, the company secretary of World Vision Australia, Libby Klein, the CEO of Christian Venues Association, Graeme Janes and the vice-chair of YMCA Australia, Chris Lewis.
“Many of Christian Super’s members have made an active choice to join the fund because of our shared values and beliefs,” chair of Christian Super Neville Cox said.
“We’re excited to explore a potential merger with Australian Ethical, a fellow pioneer of responsible investing in Australia, with a long track record of investment excellence and positive impact.
“There are many synergies and areas of close alignment in our approach, and we look forward to working together to shape a shared future for combined member benefit.”
Founded in 1986, Australian Ethical’s investments are guided by the Australian Ethical Charter, which shapes its ethical approach. With over $6.5 billion in funds under management (FUM), it is currently undergoing a turbulent period, with its share price dropping by 45.7 per cent since the start of 2022.
A breakdown of Australian Ethical’s investments per sector shows the company invests 24.8 per cent in the financial sector, 20.9 per cent in IT, 14.3 per cent in health care and 11.4 per cent in communications. All investments are from the most recent portfolio provided, dated 30 June 2021, and percentage holdings were not reported.
The investment management company has hundreds of investments, including individual holdings in Google's parent company Alphabet, Facebook owner Meta, Square and Afterpay owner Block, Netflix, PayPal, AT&T, Aon, Visa, Dexus (ASX: DXS), Mirvac (ASX: MGR), Humm (ASX: HUM), Blackmores (ASX: BKL), Sonic Healthcare (ASX: SHL), Hong Kong developer Hysan Development Co and Xinjiang Goldwind Science & Technology Co.
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